AT&T Still May Sell Off Cable Service

Cable access customers may not have seen the last of service changes, even if their access is restored after the recent Excite@Home outage. AT&T is still mulling over competing bids from cable service providers for its AT&T Broadband business, according to a statement from the company.

Three cable companies--Comcast, Cox Communications, and AOL Time Warner--submitted their acquisition offers for AT&T Broadband last week. AT&T's board of directors reviewed the bids over the weekend, and instructed management to continue discussions with all interested parties, said Eileen Connolly, an AT&T spokesperson.

The board of directors reportedly asked bidders to rework their offers and resubmit the proposals in one week.

If the board and management ultimately deem the bids inadequate, plans to spin off AT&T Broadband as a separately traded company may once again be put into play. The AT&T board cautioned in a statement Sunday that there's no guarantee of an outright sale of the business unit to a bidder.

Last year, AT&T began a quest to split itself into four separate companies, one for wireless services, one for its cable and broadband Internet services, and one for its consumer long-distance business, with the remaining business services company retaining the AT&T stock market symbol. AT&T Wireless Service completed its spin-off in July.

AT&T had planned to spin off its long distance and broadband divisions in 2002, but Comcast's unsolicited $58 billion merger offer for AT&T Broadband forced the board to table those plans and shop around for the best offer. AT&T rejected Comcast's initial offer as inadequate.

AT&T Broadband is the largest cable business in the United States, with about 14 million subscribers, or about one in four U.S. cable customers in the United States. It has recently expanded its cable network, in time to move its customers off the Excite@Home net when that company ran into financial problems.

Partners Involved

The intertwined finances of all the players involved adds a layer of complexity to AT&T Broadband's already Byzantine business, cobbled together from a $100 billion series of acquisitions. One of the principal reasons AT&T has pursued a breakup is to untangle the mess. AT&T also rejected the Comcast bid because it was so low compared to the price the company paid to build the business.

As an example, AT&T owns a minority share of Time Warner Entertainment (TWE), a joint venture in cable and entertainment properties with AOL Time Warner. AT&T has tried to find a way to sell off its TWE stake, either back to AOL Time Warner or to another buyer, with no luck so far, and the disposition of that stake may factor into the overall bidding for AT&T Broadband.

Any deal with AOL Time Warner for AT&T Broadband could draw the attention of politicians and regulators, concerned about the antitrust implications of the resulting company.

Microsoft, looking to detour the expansion of rival AOL Time Warner, has reportedly backed competing bids. Microsoft has also invested in AT&T, Comcast, and Cox.